I’m 25 with no job or emergency funds. What are the consequences of me pulling money from a traditional IRA?

by Richard L. Ward, CPA | Oct 16, 2018

I'm 25, and I have been out of work for eight months. I only got paid for less than a week this year. My emergency funds are gone. My family is suggesting I pull money from my traditional IRA to pay bills since no one has hired me yet. Should I listen to them?

To help you decide if this is a good option for you, I will outline the costs associated with an IRA  withdrawal. If you made only deductible contributions to a traditional IRA, then any distributions from that IRA are fully taxable to you (the owner) as ordinary income. If an individual is under age 59 ½ (like you), a distribution from a traditional IRA is generally subject to a 10 percent additional tax on early distributions.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: Richard L. Ward, CPA, is president and CEO of Capital Configuration LLC in Pittsburgh.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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